This project was initiated by the observation that a large percentage of mice in one of six transgenic lines with cardiac-specific overexpression of human CYP2J2 exhibited head swelling followed by rapid neurological deterioration and death in young adulthood. We hypothesized that the transgene had interrupted the coding or regulatory region of an important gene. We identified the 5 prime and 3 prime genomic sequences adjacent to the single transgene insertional site and found them to be highly related to a human chromosome 12 sequence that contained the RFX4 locus. The transgene was inserted into an intron of the RFX4 gene and this insertion prevented expression of a novel variant transcript (termed RFX4_v3) which led to the development of congenital hydrocephalus. We found that wild type (+/+) and transgene-interrupted alleles (+/- for one interrupted allele and -/- for two interrupted alleles) could be readily distinguished by Southern blotting and PCR. Brains from hemizygous (+/-) mice expressed approximately 50% of normal levels of the RFX4_v3 transcript and exhibited severe congenital hydrocephalus of the lateral and third ventricles associated with failure of formation of the subcommissural organ (SCO), leading to stenosis of the aqueduct of Sylvius. In contrast, the homozygous null (-/-) mice had a severe defect in telencephalon formation that led to gross prenatal brain malformations and death in the perinatal period. Indeed, investigation of -/- mice at E12.5 showed that they had lost critical midline structures including the interhemispheric fissure resulting in the formation of a single central ventricle instead of two lateral ventricles. Although the spinal cords were also malformed, facial structures, retinas, olfactory epithelium and all other non-brain tissues examined were unaffected in the -/- mice. The human and mouse RFX4_v3 cDNAs were cloned and found to be 96% identical, indicating that this variant transcript was highly conserved between these two species. Analysis of genomic sequences revealed that the mouse RFX4_v3 transcript was composed of both unique and shared exons with other RFX4 transcripts. The RFX4_v3 transcript was expressed only in brain and initially appeared between E7.5 and E9.5. In situ hybrization revealed that RFX4_v3 expression was highly dynamic during brain development. Importantly, abundant expression of RFX4_v3 was found in the region of the developing SCO in the caudal diencephalon at E14.5. Together, these data indicate that RFX4_v3 is critical for normal brain development. Moreover, the failure of formation of the SCO in +/- mice suggests that this unusual brain organ is extremely sensitive to normal developmental expression of RFX4_v3.